Technology and Best Practices Fuel Growth for SAP Brazil

SAP’s growth in Brazil has outpaced growth in not only other parts of the world but also growth in the Brazilian market. As an emerging economy, rapid growth is to be expected, but along with that growth comes the usual challenges. These obstacles are amplified in Brazil, a difficult business environment burdened by challenging tax and regulatory requirements. This demanding environment not only presents an impediment to growing Brazilian companies, but also the enterprise software vendors that would love to help, and in doing so, fuel their own growth. SAP’s exceptional success stems from a value proposition that combines new, innovative technology with localized business best practices. And a focused, purposeful plan doesn’t hurt either.

How Much Growth?

The first half of this year SAP Brazil grew its software business by 80%, far ahead of the growth of the overall software market.  Indirect business grew faster than direct, which for SAP means growth in small to medium size enterprises (SMEs), serviced exclusively by its channel partners.

Part of this growth resulted from a regional focus. While the concept of sales regions is widely accepted and even natural in other large countries like the United States, this type of sales approach was new for the vast territory that makes up Brazil. After introducing this regional concept, SAP Brazil saw triple-digit growth in some regions. Software revenues in the northeast part of the country grew by 400%. Just having undivided attention and a more local presence seems to pay off.

Is Brazil a Land of SME Opportunity?

Historically Brazil has been a country of extremes. It is home to some of the largest corporations in the world. And yet according to Endeavor, a non-profit dedicated to promoting long-term economic growth through mentoring and supporting entrepreneurs, about 90% of companies in Brazil are micro-companies. While definitions of a micro-company might vary around the world, they are generally very small. Small companies have tended to stay small in Brazil for two reasons.

Brazil is not a country known for entrepreneurship. Many more startups were born from unemployment than from an entrepreneurial spirit. And once a certain revenue threshold is exceeded, (still) small companies are subject to the same tax and regulatory requirements as very large enterprises. Where the small company lacks the manpower and expertise to handle these stringent requirements, it stays small by design. As many of these businesses are now being passed on to a new generation, the desire for growth is met with frustration. Most have yet to invest in solutions that can help fuel growth. Those vendors that truly understand these local requirements and can offer affordable services and solutions that meet these needs will be most likely to capitalize on this opportunity.

SAP obviously plays in the large enterprise and as a result has a lot of knowledge and expertise available to bring to bear on the problem. Much of what it has learned in supporting large multi-nationals is relevant and the knowledge is transferrable.

But the largest potential for growth in Brazil is in this SME segment. SAP identified 400,000 (out of a total of 2 to 2.5 million small businesses) as being in its addressable market. Today about 1% (4,000) of them are SAP customers and SAP is on a mission to significantly increase that percentage.

Is the Growth Sustainable? Partners Play a Big Role

But is the growth achieved thus far sustainable? Because SAP sells exclusively through the indirect channel in the SME segment, its continued success depends a lot on its partners. For the most part these partners are local (Brazilian) companies and with the exception of the big multi-national consultants and systems integrators, they too are SMEs. So they understand the market and are well positioned to help SMEs deal with Brazilian bureaucracy.

Combining this expertise with SAP’s investment in technology is key. Not every enterprise software vendor has deep enough pockets to address these local requirements. SAP does, and is going two steps further. Step one is in its investment in transformative (some call it disruptive) technology. Step two involves using that technology to embed localized best practices into its solutions.

Because partners are so critical to the success equation, I spoke at length with one of them about what has made SAP and its partners so successful this past year.

Partner Profile: Cienci

Cienci is a partner offering a broad portfolio of SAP products. I asked Ricardo Nobrega da Silva, Director of Cienci to share what he felt was the secret to SAP (and its own) recent successes. His answer: SAP has evolved from an ERP company to a technology company, providing businesses large and small the kind of innovation they need to compete and grow. This is reflected in Cienci’s own broad portfolio. Selling to the mid to large segment of SMEs in Brazil, it offers:

  • SAP ERP, both as ECC (Enterprise Central Component, the heart of the Business Suite) and packaged for the SME as Business All-in-One
  • SAP GRC Nota Fiscal Electronica (SAP NFE) to support companies in complying with the requirements of the Brazilian authorities for electronic invoicing
  • SAP Vendor Invoice Management (VIM) by OpenText, a prepackaged application that works with SAP ERP to stream-line accounts payable processes
  • HANA
  • Fiori, a new collection of 25 apps that will surround SAP ERP, providing a new user experience for the most commonly used business functions of ERP
  • Mobility solutions including
    • SAP Mobile Platform (SMP)
    • Sybase Unwired Platform (SUP)
    • Syclo, a work management mobile app for field service productivity and safety
    •  Afaria to manage devices
    • Apps it has natively developed for mobile devices
  • Integration services using SAP NetWeaver Process Integration (PI) and Gateway
  • Other services in support of SAP products and implementations

In addition, Cienci signed the first Managed Cloud as a Service (MCaaS) contract for Fiori in the world and is also certified for SAP CRM Sales Mobile Rapid Deployment Solution (RDS). It also focuses on SAP HCM solutions and SuccessFactors and signed the first OEM contract for SuccessFactors in the world.

“All the latest technology trends are important in Brazil, just as they are in other parts of the world. This includes social, mobile, cloud and big data. SAP is a big company and has invested a lot in bringing innovation to the market faster across a broad portfolio. Take mobility as an example. It is the only company that can deliver both a platform to manage devices [Afaria] as well as a development environment to develop mobile applications,” said Mr. Nobrega.

Is Technology Enough?

That said, even though Brazilians are generally receptive to new technology, Mr. Nobrega cautions they will only buy it if the technology adds business value. While he feels SAP is making the right response to the market with the right solutions, smaller companies need to be educated on the potential business impact. Like smaller companies around the world, they tend to focus on cost only and are reluctant to invest.

So educating these small companies is a necessary step in the process. The challenge for SAP and its partners is to prove the value, particularly if the technologies, and even sometimes the issues, are not well understood.

This issue is not unique to Brazil. Most small and medium size business executives are not technologists, and unless they are, they might not know or care about that underlying technology, because they don’t understand it. They might feel the systems they have today are the best on the market. In other words, they don’t know what they don’t know. Or they may simply feel they can’t afford anything better.

There is danger in this type of thinking. Those lagging behind in technology-enabling their businesses don’t need to understand how new technology works but they do need to understand what it can do for them.  They also need to understand that solutions today are more affordable than ever. And finally they need to be able to quantify the potential return on investment. This education process is a job for both SAP and partners like Cienci.

The first step in this education process might be in dispelling some SAP myths.

Myth #1: The first myth is that SAP is only for big companies. The reality is that a large majority of SAP’s customers, numbering more than 80,000, are SMEs.

Myth #2: The second is the SAP only offers complex and expensive ERP. In fact SAP offers three different solutions in Brazil:

  • The SAP Business Suite with ECC at its core
  • SAP Business All-in-One, which also has ECC at its core, but is pre-configured for specific industries and packaged with best practices to speed and ease implementation
  • SAP Business One, an entirely separate and distinct ERP product designed for small companies (generally with fewer than 100 employees)

Myth #3: The next myth is that SAP solutions are only offered as a traditional on-premise deployment. In fact there are several different cloud deployment options, including managed services in the cloud (MCaaS) and Software as a Service (SaaS).

Myth #4: And the final myth is that all implementations are long, slow and cost millions of dollars. The reality is the speed and ease of implementations has been steadily improving over the past decade and there are instances where first go-live milestones are achieved in weeks, not months and years. As to the cost, get a quote.

Of course any company, large or small, will need to cost justify a solution. For this, we would point to Mint Jutras research that quantifies the results measured since implementing ERP. And these results might surprise you.

Figure 1: Improvements Realized Since Implementing ERPSAP Brazil Fig 1

Source: Mint Jutras 2013 ERP Solution Study

The improvements shown in Figure 1 come from the 2013 Mint Jutras ERP Solution Study. These improvements were measured “since implementing ERP”. While it would be tempting to call them results achieved “as a result of ERP”, in reality improvements like these always result from a combination of people, process and technology. ERP can’t take all the credit, but is often the catalyst and vehicle by which they are achieved. World class denotes the top 20% in terms of performance measured by results, progress against goals and current performance in selected (universal) key performance indicators. Note that even those not world class achieve very significant results, typically enough to cost justify the investment.

Summary and Key Takeaways

The growth SAP has enjoyed in Brazil over the past year has resulted from combining its efforts with those of its local partners. Leveraging its heavy investment in development and its experience with large enterprises around the world, it has brought the necessary functionality to its solutions. Deep pockets and a focus on disruptive technology have allowed it to stay ahead of the technology curve. The challenge will be in not getting too far ahead of the adoption curve. SAP and its partners will have to work together to educate prospects and even existing customers to better understand the potential, not for technology sake, but in demonstrating the impact on the business itself.

But to pave the way for this technology-enablement, SAP and its partners first need to mentor and guide small growing businesses through the Brazilian jungle of bureaucracy, tax and regulatory compliance.

Tagged , , , , , , , , , , ,

fake luxury watches for sale